Solar in Indiana: Fading Incentives in a Mediocre Solar State

Indiana is one of the tougher states for residential solar in 2026. The sunshine is mediocre — about average for the Midwest. The incentive structure has been hollowed out over the past several years. And the state made a deliberate policy choice in 2017 to phase out net metering, which has significantly weakened solar economics for homeowners.

This is not a state where solar is an obvious slam dunk. But it is not impossible either — if your electricity costs are high enough and you understand the current rules, the math can still work for certain homeowners.

Here is the honest picture.

The Good News

Reasonable Installation Costs

Indiana solar installation costs have dropped to $2.70-$3.20 per watt, roughly in line with the national average. The Midwest installer market is competitive, with several national and regional companies serving the Indianapolis, Fort Wayne, and Evansville markets. You should have no trouble getting three or more quotes.

Property Tax Exemption

Indiana exempts solar energy systems from property tax assessments. If your solar installation adds $18,000 to your home value, your property taxes remain unchanged. Given Indiana's property tax rates (typically 0.8-1.2%), this saves you $150-$220 per year in avoided taxes.

Rising Electricity Rates

Indiana's average residential electricity rate has climbed to $0.14-$0.16/kWh and the trend is upward. Duke Energy Indiana, Indiana Michigan Power (AEP), and Indianapolis Power & Light have all filed for or received rate increases in recent years. As rates climb, the value of solar self-consumption increases proportionally.

Decent (Not Great) Solar Resource

Indiana averages 4.0-4.5 peak sun hours per day. Southern Indiana (Evansville, Bloomington) is on the higher end. Northern Indiana (Fort Wayne, South Bend) is on the lower end and gets more cloud cover from the Great Lakes. It is not Arizona, but it is enough to make solar functional.

The Challenges

Net Metering Was Eliminated

This is the critical issue. In 2017, Indiana passed Senate Bill 309, which phased out retail-rate net metering for new solar installations. The phase-out was completed in 2022. New solar customers are now compensated for exported electricity at the utility's "excess distributed generation" rate, which is significantly lower than retail — typically $0.03-$0.05/kWh.

For context, if you are paying $0.15/kWh for electricity from the grid and only receiving $0.04/kWh for what you export, every kilowatt-hour you fail to self-consume costs you $0.11 in lost value. This makes self-consumption the defining factor in Indiana solar economics.

No State Tax Credit or Rebate

Indiana offers no state income tax credit for solar. No rebate program. No SREC market. There is no state-level financial incentive to offset the upfront cost. With the federal ITC also expired, the incentive landscape is barren.

Cloud Cover

Indiana is one of the cloudier states in the country. Indianapolis averages about 186 sunny days per year — below the national average. Winter months from November through February are particularly overcast, and seasonal production drops accordingly.

The Indiana Solar Math (2026)

Typical 8kW system:

• Installed cost: $23,200 ($2.90/watt)
• Federal ITC: $0 (expired January 1, 2026)
• State credits: $0
• Net cost: ~$23,200

Annual production: ~9,800 kWh

Self-consumption ratio: 70% (intentional load shifting required)

Average retail rate: $0.15/kWh

Export credit rate: ~$0.04/kWh

Year 1 savings:

• Self-consumed: 6,860 kWh x $0.15 = $1,029
• Exported: 2,940 kWh x $0.04 = $118
• Total year 1 savings: ~$1,147

Payback period: 20-22 years (at flat rates), 15-17 years (with 4% annual rate increases)

25-year savings: $10,000-$22,000

The numbers are not great. A 20+ year payback at flat rates is essentially the expected lifespan of the system. You are relying on electricity rate increases to bring the payback into a reasonable range. That rate increase is likely — but it is a projection, not a guarantee.

Adding a battery like the Tesla Powerwall can significantly improve your self-consumption ratio by storing daytime excess for evening use, which is critical when export credits are only $0.04/kWh. Getting multiple quotes also helps keep upfront costs as low as possible in a state where every dollar matters.

When Solar Makes Sense in Indiana

Install if:

• Your monthly electricity bill is over $175 (high usage benefits from high self-consumption)
• You can aggressively shift loads to daytime — run the dishwasher, laundry, EV charging, and AC during peak solar hours
• You are adding a battery to capture excess production for evening use
• You plan to stay in your home 15+ years
• You are motivated by energy independence, not just payback math
• You live in southern Indiana with better sun exposure

Wait or skip if:

• Your electricity bill is under $100/month
• You cannot shift significant electricity usage to daytime hours
• You want a payback under 12 years
• You plan to move within 10 years
• You live in northern Indiana with heavy cloud cover
• Your roof is shaded or north-facing

Key Takeaways

• Indiana eliminated retail-rate net metering in 2017 — new systems get $0.03-$0.05/kWh for exports
• No federal or state tax credit in 2026 leaves zero upfront incentives
• Self-consumption is everything — you need to use 70%+ of your production directly to make the math work
• Property tax exemption is the only meaningful state-level benefit
• Typical payback is 15-22 years depending on rate increase assumptions
• Batteries significantly improve economics by shifting daytime excess to evening use
• Indiana is a below-average solar state — it can work for high-usage homeowners who stay long-term, but it is not for everyone

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